Thursday, November 11, 2010

An Unappreciated Component of Nazi Productivity

One supposed silver lining of totalitarianism is that they make the trains run on time. That is, they are efficient. As Galbraith used to say, the Soviets never had involuntary unemployment! After the fall of the Iron Curtain and the revision of GDP data, this is rarely uttered much anymore.

But then, who can deny the Nazi's were, at some level, productive? They made the autobahn, and great tanks. I just found this rather fascinating research:
Historians have uncovered evidence leading to the estimation that the Nazis' wartime confiscation of wealth from Europe's Jews financed about 30 percent of the expenditure of the German armed forces during WWII.

The official study of the German Finance Ministry under the Nazis from 1933 to 1945 was conducted by historian Hans-Peter Ullmann.

But boy did the Gini coefficient decline from 1934 to 1945! Clearly, a lot of their growth was ephemeral--expropriation--and their regime too short to see the them reap what they sowed. As Lew Rockwell said of Hitler's economics:
Proto-Keynesian socialist economist Joan Robinson wrote that "Hitler found a cure against unemployment before Keynes was finished explaining it."

What were those economic policies? He suspended the gold standard, embarked on huge public works programs like Autobahns, protected industry from foreign competition, expanded credit, instituted jobs programs, bullied the private sector on prices and production decisions, vastly expanded the military, enforced capital controls, instituted family planning, penalized smoking, brought about national health care and unemployment insurance, imposed education standards, and eventually ran huge deficits. The Nazi interventionist program was essential to the regime's rejection of the market economy and its embrace of socialism in one country.

I think Jonah Goldberg says it well:
If you leave out the parts about killing all the Jews and invading Poland, what specifically about the Nazi political platform do you disagree with?

I can honestly say 'almost all of it'. Most modern liberals can't.

update: Jonah Goldberg wrote the book Liberal Fascism where he makes this point. For the record: he does not admire Nazis and neither do I. I suppose as an american of German heritage I should be more explicit about that, because on the internet it's easy to misinterpret points that aren't super straightforward (As Harrison Ford said in Indiana Jones and the Last Crusade: "Nazis. I hate these guys."). Goldberg points out that other than their militaristic imperialism and racism, much of their policy is pretty consistent with modern liberal and progressive politics. The road to serfdom starts by giving the state a lot of power.


Michael Stack said...

I normally enjoy your posts, but, "If you leave out the killing of the Jews, what specifically about the Nazi political party do you disagree with?" - really?

If you leave out the unbelievable pain, what about torture do you specifically disagree with?

The fact that those other policies were Nazi party policies is neither here nor there; the reason Nazi policies have such a bad rap is because, well...they killed a lot of Jews. Beyond that, it's just guilt by association.

stefan said...

How about suppression of strikes and union bargaining? Lots of socialists saw support of the Nazis as driven by their anti-union policies -- indeed, anti-socialist anti-union suppression was a huge part of what Nazi rule was about and how it was perceived in Germany at the time (both positively and negatively).

Anonymous said...

Starting in 1943 the Germans re-introduced market-based economics into their socialist economy. The result was a surge in output despite allied bombing. The Nazi experience is an argument in favor of liberal economic policies, not socialist ones.

Drewfus said...

"I can honestly say 'almost all of it'."

But why, given that it appears to have worked?

Is it because they relied so much on confiscated wealth, therefore there are no economic lessons to be learned from the Nazi experience?

Keynes noted in the preface of the German edition of his General Theory that his ideas would be much more likely to work in a totalitarian regime than in a democratic one. Perhaps this was because the control of the economy by the government means that additional government spending can mostly be I, and not C.

In America and western Europe, this is very difficult to achieve these days. Perhaps Democracy and Keynesianism don't mix?

Bob said...

As distastful as I find this framing of the discussion. Please forgive my comments.

Do we not have confiscation of wealth by excessive taxiation and destruction of captial in this country by our Keyesians?

I would ask the Jonah Goldberg question, if you remove all mention of Nazism from the description just what don't the progressives dislike?

Eric Falkenstein said...

Jonah Goldberg wrote the book Liberal Fascism, where he makes this point. For the record: he does not admire Nazis and neither do I. I suppose as a gentile I should be more explicit about that (As Harrison Ford said in Indiana Jones and the Last Crusade: "Nazis. I hate these guys."). But Goldberg points out that other than their militaristic imperialism and racism, much of their policy is pretty consistent with modern liberal/progressive politics. The road to serfdom starts by giving the State a lot of power.

Germany enjoyed a temporary economic boost from expropriating their Jewish population--eating their seed corn--and so I think they would have stagnated like a kibbutz or Eastern-block country.

Robert Johnson said...


Did Lenin and/or Stalin support collective action taken by groups that were independent of the Communist party? How do you suppose genuine, independent unions would have fared in the Soviet Union?

My point is that the argument that there are practical differences between Fascism and Communism is nonsense.

Dan said...

"I can honestly say 'almost all of it'. Most modern liberals can't."

So? It's hard to understand what your point is. Because liberals agree with Keynesian aspects of the Nazi economic policies that makes them nazis?

Hitler was a vegetarian and loved animals. I have a vegetarian friend. This is like me saying to him: "if you take out the killing of the jews and all the nazi economic policies, you end up with animal loving vegetarian. I disagree with half of Hitler's ideology, but you don't"

Or is it your point that Keynesianism, deficits and spending on public works, education, healthcare, etc. necessarily lead totalitarian regimes and the mass killing of populace. This is empirically not true, unless those swedes are plotting secretly to take over europe.

So I am curious what your point is and why you would mention Hitler?

Dave said...

Actually, today's mainstream liberals are on the same page as today's mainstream conservatives when it comes to their embrace of free trade (such as it is), and Hitler pursued the opposite policy (of autarky) during the '30s.

Also, the Soviets built a better tank during WWII (the T-34) and built a lot more of them. Nazi Germany did build more technologically impressive stuff such as jet fighters, but too little and too late to make a difference in the war.

Eric Falkenstein said...

I'm not saying because A is correlated with B all A is B. I'm saying, they aren't independent (evil states and power vested therein), and there's a fundamental reason why. The expropriation highlights their structure was not efficient, it was running on a one-time gain.

Dave said...

If the research you cite is correct, then the Nazi economic structure wasn't efficient. What about Italian fascism in the 1920s though?

The line about making the trains run on time was about Mussolini, after all. And prior to his alliance with Hitler in the 1930s, his government wasn't persecuting or expropriating from Jews.

For that matter, what about postwar fascist, or (to use descriptive terms with less moral/historical baggage) rightist authoritarian regimes? Were the economies of South Korea and Taiwan efficient pre-democracy?

You seem to have stopped thinking about this with the Nazi example, perhaps because Jonah Goldberg used examples of Nazi policies leftists agree with to tweak leftists. Of course, one could flip around that rhetorical tactic.

You might agree with me that Chile's social security system makes a lot of sense. It was, of course, instituted during Pinochet's rightist (fascist?) dictatorship, as were other economic reforms, the legacy of which is that Chile is generally considered the best-run country in Latin America today.

Couldn't a Jonah Goldberg of the left ask, "Other than arresting dissidents without trial, torturing them, and throwing them out of airplanes over the Pacific, what about the Pinochet government do you disagree with"?

clayton said...

The only things "modern liberals" would agree with are: instituting national health care and unemployment insurance, imposing educational standards, and some public works programs. That's a very small part of the Nazi economic plan and contains none of the ugliness that repulses people and characterizes it as "Nazi". Further, those things are staple parts of economic policies of many countries in the West today and are not correlated with or harbingers of the other Nazi ugliness. Not sure what your point is.

You make great points in this blog about finance, but virtually every time you venture out of that turf, you embarrass yourself. It's as if your IQ falls by 40 points. Perhaps you're an idiot-savant.

paul b said...

I think the point is that not respecting individual rights leads to strong central governments which is bad. sometimes the government justifies instituting public schools, subsidizing businesses and health care for the greater good. sometimes it justifies starving a class of people or exterminating a specific group of people. but in every case it's wrong.


Anonymous #5 said...

Eric's discussion of liberalism and Nazism has been very eye-opening for me. It's actually pretty horrifying.

Eric reads Jonah Goldberg and thinks he's worth taking seriously.

I read Eric and think he's worth taking seriously.

Thus I am a freaking moron. QED.

Thanks for removing the veil from my eyes. Good grief.

Anonymous said...

The only senator to vote against the Patriot Act was a liberal (Russ Feingold, who unfortunately lost in the last election).

There is more to freedom than the top income tax rate, you know.

clayton said...

Eric's argument is this:

1. Nazis supported x
2. Modern liberals support parts of x
3. Thus, liberalism leads to Nazism.

I don't need to say this (although perhaps I do), but the argument is silly.

Paul b is committing a slippery slope fallacy.

Eric Falkenstein said...

I would rephrase:

1) Nazis supported x
2) Nazis did singular evil things y and z
3) the pursuit of x contributed to y and z

Contributed to means 'lead to' in a probabilistic sense; it does not necessarily. It may be unintentional (most proponents of socialism are horrified by Stalin's purges and genocides, or Mao's starvations), and it is not a logical necessity.